company position: european hamonisation

Last updated: 03/01/2012

Overall, SmartestEnergy supports European harmonisation. We also agree with the general aims of the Third Energy Package but believe the 2014 delivery timetable is unrealistic.

We are not opposed to the idea of market splitting and feel that it is worthy of further consideration.  However, if the UK is not part of a wider EU market, it makes more sense to maintain the current marginal pricing and locational charging arrangements to create the right incentives within the UK.

EU third energy package

We see GB as already compliant - to some extent - with the requirements for unbundling, consumer protection and ten year network plans.

We believe Ofgem is the most suitable candidate for the National Regulatory Authority in GB. Giving the regulator this new role would be an extension of its current powers and avoid the costs and time required to establish a new body.

We further welcome the establishment of the Agency for Cooperation of Energy Regulators (ACER) and feel it will assist in efficient harmonisation.

transmission system operators (TSOs)

We are concerned that under the European Network for Transmission System Operators for Electricity (ENTSO-e), TSOs are in a monopolised position and appear to be negotiating on behalf of participants.

We are also concerned over TSO involvement in the European Network Codes. It is unclear whether the outcome of these arrangements will affect cross border or within area trading but there is a risk that the process may take on a life of its own with TSO involvement. It is important to note that there is a level of distribution into which TSOs have no jurisdiction.

We are aware that the frequency capability requirements for GB in the draft generator code are more demanding than anywhere else in Europe. GB’s requirements will be different to the rest of the EU which goes against a key principle of the third package that manufacturers (such as those producing wind turbines) could sell the same product in all member states.

interconnection

In comparison to other European countries, GB already has a more open market. However, it is evident that GB’s limited interconnection to mainland Europe is a limiting factor. Changes to the system may be expensive compared to the additional access they provide.

market splitting

In order to create a single, harmonised European electricity market, GB will need to have the necessary market coupling arrangements in place across interconnectors with other European member states.

We see that market coupling arrangements may also have the potential to address internal congestion. In the case of GB, it could facilitate the mitigation of the constraint boundary between Scotland and England.

Certain aspects of DECC’s Electricity Market Review (EMR) may hinder European market harmonisation.  EMR proposes CfDs, selective capacity payments and a carbon floor price. These support measures affect energy prices and unless they are made consistent throughout Europe, distortion in cross border trades could present a significant issue.  

For additional information, please contact us.

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